What Is An HMO? What Are The Pros And Cons?

For many, a good starting point is an HMO (Health Maintenance Organization). HMOs are health plans that have contracted with a network of doctors, hospitals, and other healthcare providers, to provide treatment for an agreed-upon fee. These providers are called “in-network providers." This means costs are lower for consumers because providers have agreed to reduced fees in exchange for access to more patients. Usually, HMOs only offer coverage for in-network care, so your choice of providers may be limited.

How Do HMOs Work?

In an HMO, your primary care doctor (PCP) is your main point of contact, and the person you see first when you need care. If your PCP decides you should see a specialist, they can refer you to one who is also in-network. You may not get coverage for a specialist visit without that referral.

One exception is preventive care. If you visit a provider in the HMO's network, you usually will not need a referral for a preventive mammogram, colonoscopy, routine bloodwork, and other care the health plan agrees is appropriate for your age.

Pros and Cons of HMOs

The Pros

HMO plans are usually less expensive than other types of health plans. Copayments, deductibles, and coinsurance are often lower due to the pricing health care providers agree to in exchange for the volume of patients they hope to get from the HMO. Also, PCPs may be able to diagnose and treat a condition, negating the need for a more expensive specialist. This helps insurers keep their costs down, which allows them to charge lower premiums for this type of plan.

Some plans may require you to pay out-of-pocket and then file for reimbursement – HMOs generally do not do this.

Some people enjoy having their PCP as their main point of contact for most of their medical needs. They may value a relationship with one doctor who knows their medical history and can steer them in the right direction should a serious condition arise.

The Cons

For most health issues, your primary care doctor is your first stop. This can be helpful in some cases, but you will not have the freedom to go to a specialist without a referral and getting in to see your primary care doctor could take time. Also, if your insurer's network has only a few of the specialists that fit your needs, getting treatment could take some time.

An HMO's network may be limited to a geographic area, which can be a problem if you move to an area with a different network of providers. This means if you stay with the HMO insurance plan, you will need to find a new PCP and specialists. This could be problematic if you have a chronic condition or have been seeing the same doctor for years and want to stick with them.

Is an HMO Worth It?

HMOs have a lot to offer, including the peace of mind of having a primary care physician coordinate your care, and lower costs than some other types of plans. If you are comfortable getting a referral to see specialists and with the potential of a smaller group of providers to choose from, an HMO might be the right choice for you.

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Our Expert Reviewer

Patty Caballero and her team of consultants together have more than 35 years of health insurance knowledge working for some of the biggest health insurance companies in the US. She has knowledge in building brands and strategic initiatives to help consumers better understand their health benefits.